National cases reach lowest level in a decade

Continuing their downward march, bankruptcy filings in Western New York again fell in August, showing no signs of having reached a new floor.New bankruptcy cases fell 10.6 percent from a year earlier in the Buffalo and Rochester courts, to 538 filings from 602 in August 2011, according to new statistics from the U.S. Bankruptcy Court for the Western District of New York. That includes a 7.7 percent decline in Buffalo, to 359 from 389, and a 16 percent drop in Rochester, to 179 from 213.For the first eight months of the year, total filings fell 10.4 percent in the entire district, to 4,407 from 4,919 for the same period of 2011. That included an 8.8 percent drop in Buffalo, to 2,887 from 3,167, and a 13.2 percent drop in Rochester, to 1,520 from 1,752. All tallies for 2012 were the lowest for August in at least a decade.Nationwide, meanwhile, total bankruptcies are on track for the lowest tally for the year since the financial crisis began in 2008. "Month-to-month 2012 filings have either declined or remained basically flat," said bankruptcy attorney Jeffrey Freedman, who called it a response to the higher costs of filing for bankruptcy and the lower income of debtors.The number of new filings has fallen almost every month in the past two years, almost defying the logic of a bad economy and lackluster recovery.But experts say that debtors are deterred by the filing and attorneys' fees, which they can't afford, and by new legal protections that essentially mean the debtors aren't desperate to seek court protection. The cost of filing for bankruptcy has risen to about $1,500 since federal bankruptcy reforms in 2005 that imposed new requirements. And the law now protects from seizure a higher level of a debtor's initial money and other assets, and as long as their assets don't exceed that amount, creditors can't legally get anything.According to court data cited by Freedman, the wealth of consumer debtors has been falling. The median income of consumer debtors was down 23 percent in 2011 over 2010, while median assets were down 1 percent and median average monthly expenses were down 1 percent. And a study by Columbia University, the University of Chicago and Washington University found the number of filings rises when income tax refunds come out, indicating that the debtors are waiting for the cash lump sum before they can file."Many consumer debtors put off filing, and in doing that see their debt load increase significantly as interest payments get higher," Freedman said. "It's a vicious cycle, with little hope of relief."Bankruptcy laws allow debtors to seek court protection against creditors that would otherwise seize all their assets, giving them time to develop a permanent solution. Chapter 7 of the U.S. Bankruptcy Code allows individuals and businesses to write off all their unsecured debts and wipe the slate clean to start over. Chapters 11 and 13 provide for businesses and individuals, respectively, to follow court-approved restructuring and repayment plans to make good on their debts.